Ivory’s approach to portfolio risk management is the foundation upon which the firm was established. This approach focuses on the management of “spread risk.” Spread risk management is defined as the active balancing of long and short positions with similar characteristics or exposures. Ivory monitors a number of different factors including market capitalization, stock liquidity, company leverage, valuations and dividend yields, among others. Ivory believes that having a thorough understanding of such characteristics within a portfolio is essential to managing portfolio risk.
To manage spread risk, Ivory has developed proprietary systems and models that simultaneously track more than 50 factors across the firm’s portfolios and proprietary indices representing the broader markets. Ivory’s investment team analyzes these models to identify portfolio biases relative to market trends and, in turn, determines which spread risks should be neutralized to mitigate portfolio risk.